The United Kingdom is the second-largest net contributor of funds to the European Union after Germany, and London feels its contributions exceed the benefits it receives. For example, the Common Agricultural Policy basically subsidizes agricultural sectors in continental Europe, and the Common Fisheries Policy has essentially forced the United Kingdom to share its fishing waters. Thus, the country has resisted full cooperation with Brussels several times in the past. In November 2011, for example, the United Kingdom refused to sign the European Union's fiscal compact treaty.
Still, despite its long-standing alliance with the United States, Britain is foremost a European power, and it cannot afford to be excluded from Continental affairs. Throughout history, London's most persistent concern has been the possible emergence of a single European power that could threaten the British Isles politically, economically or militarily. Maintaining a balance of power in Europe — especially one in which London has some degree of influence — is a strategic imperative for the United Kingdom.
From an economic perspective, London needs to be able to influence regulations governing the European single market, as half of all British goods and services are exported to EU member states. Even if the United Kingdom decided to leave the European Union but remain a part of the European Economic Area — which includes non-EU members such as Iceland and Norway — the country would still be required to make budgetary contributions to it, just without a vote in EU decisions. London is also interested in coordinating military and diplomatic policies with its European partners, especially France.
The Likelihood of a Referendum
The European crisis has reinforced the traditional wariness among British voters of the European Union, and the political establishment is reflecting this popular mood. The issue of EU membership has generated pro- and anti-European divisions within each major party. Since taking office in 2010, British Prime Minister David Cameron has been under constant pressure from his own Conservative Party to redefine the relationship between London and Brussels.
Indeed, a faction within the conservatives has even been calling for a nationwide referendum on the country's EU membership. Cameron is also feeling pressure from the United Kingdom Independence Party, traditionally the country's most anti-EU bloc. According to polls, the party has been gaining support, and Cameron fears it could pull conservative anti-EU voters away from the Tories in the 2014 European Parliament elections and 2015 general elections.
On Sept. 28, Cameron openly supported the referendum idea, but he declined to call for a vote on a specific date and said that discussion about the issue should be delayed until after the 2015 elections. Holding a referendum now would only add uncertainty to financial markets and further complicate the European crisis. With the European Parliament elections still two years away, Cameron has time to make a decision.
Treaty Changes and Reforms
In the meantime, London will have other opportunities to redefine its role in the European Union. Cameron also announced Sept. 28 that the United Kingdom would decide later this year whether to exercise an opt-out clause regarding 140 EU law-and-order measures. Such a move would not be unusual; Denmark has similar opt-out clauses. But in the United Kingdom, it would test the strength of the ruling coalition. The Liberal Democrats — the Tories' minor coalition partner — rejects opting out, but refraining from doing so would upset the anti-EU factions within the conservatives.
London can also take advantage of the eurozone crisis. Brussels is currently considering several new tools and institutional reforms, including a banking union and a financial transaction tax, that it hopes would mitigate the effects of the Europe's economic crisis. Some of these reforms will likely be applied only to eurozone countries, while others will affect all 27 members of the European Union. In addition, German and French officials have recently stated that the Lisbon Treaty itself — the European Union's current legal framework — could also be revised. Most of these measures would involve either the creation of new institutions or the modification of existing treaties.
In negotiations over each reform, London would likely ask for special concessions and opt-out clauses similar to others it received in the past. In exchange for signing the Maastricht Treaty, which created the European Union in 1992, the United Kingdom was exempted from adopting the euro. In negotiations over the Lisbon Treaty in 2007, the country received an opt-out from the Charter of Fundamental Rights of the European Union, which London feared would force changes to British labor laws. In any new negotiations, London would likely seek the return of powers from Brussels in areas such as social and employment policy and strongly oppose any measures undermining the independence or competitiveness of the British financial sector.
Still, negotiations over treaty changes would take time. Even if EU leaders could quickly agree in principle to a new treaty, finalizing the pact's details and navigating the ratification process in each country would take at least two years. Thus, London has space to define its position on EU membership.
Even if the United Kingdom would rather not renegotiate its EU status, it could be forced to do so by domestic law. In 2011, the British Parliament passed the European Union Act, which requires the country to submit to a referendum any concession of British sovereignty to the European Union. Prior to the law, EU treaty changes required ratification by only the British Parliament. If a referendum were to occur, the details of what it would involve remain unclear.
While London will attempt to balance its sovereignty, its need for access to the single market and its desire for influence in EU decision-making, the country will likely become more isolated from Europe's decision-making core — especially as the divide between eurozone and non-eurozone countries widens. Regardless, a full withdrawal from the European Union will remain counter to the country's strategic interests.
Editor's note: A previous version of this piece misidentified a non-EU member of the European Economic Area. The correct member is Iceland.